Fox News "Fox News Sunday with Chris Wallace" - Transcript

Interview

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BRET BAIER, GUEST HOST: I'm Bret Baier, in for Chris Wallace.

The debt ceiling negotiations hit a snag.

As President Obama and congressional leaders work overtime to forge a deal, we'll get a progress report from the Senate Republican Leader Mitch McConnell, and from top House Democrat, Congressman Xavier Becerra.

Then, after reshaping the political landscape, the Tea Party looks ahead to the 2012 presidential race. We'll talk about the campaign and size and scope of government with the man called Senator Tea Party, Jim DeMint.

Also, a stunning unemployment report send shockwaves down Main Street and Wall Street. We'll ask our Sunday panel how damaging the numbers are with the president.

All right now on "Fox News Sunday."

Hello again from Fox News in Washington.

Late Saturday, there was a major development in the debt ceiling negotiations. Speaker of House John Boehner issued this statement, asking for a smaller package instead of the bigger grand bargain. Quote, "Despite good-faith efforts to find common ground, the White House will not pursue a bigger debt reduction agreement without tax hikes. I believe the best approach may be to focus on producing a smaller measure based on the cuts identified in the Biden-led negotiations."

White House communications director Dan Pfeiffer responded with this, quote, "The president believes that now is the moment to rise above that cynicism and show the American people that we can still do big things. And so, he will make the case to congressional leaders that we must reject politics of least resistance and take on this critical challenge."

Joining us now is the Senate's top Republican, who will be a key participant in today's talks. Senator Mitch McConnell.

Welcome back to "Fox News Sunday," Senator.

SENATE MINORITY LEADER MITCH MCCONNELL, R-KY.: Glad to be here.

BAIER: Let's start with what happened and from your perspective, where do things stand now ahead of this meeting tonight at the White House?

MCCONNELL: Well, unfortunately, as the speaker said, insisting on the White House and congressional and Democrats insisting on really big tax increases as a condition to do anything on the spending side, we believe the president was right back in December when he signed the two-year extension of the current tax rates that raising taxes in the middle of this economic situation we're in is a terrible idea. Let me just look at the unemployment figures last Friday. All the arguments the president used in December still today were today. There's an additional issue addition to unemployment at work here is what kind of government do you want to have?

And if you look back at the last two and a half years, you see the government running banks, insurance companies, car companies, national housing loan business, taken over healthcare, trying to take over the Internet, increasing spending, discretionary spending 24 percent, increasing debt 35 percent. What -- how big a government do we want? And we don't want to use this opportunity presented by the president's request of us to raise the debt ceiling to kind of freeze perpetuity this much government. I don't thin the American people want it. I don't think it's good for the economy.

BAIER: So, is the big deal, a $4 trillion deal now off the table?

MCCONNELL: Well, I think it is because everything they told me and the speaker is that to get a big package would require a big tax increases in the middle of economic situation that's extraordinarily difficult with 9.2 percent unemployment. We think it's a terrible idea. It's a job-killer.

BAIER: I mean, you mention the unemployment rate. It came out Friday, 9.2 percent. Uptick, 18,000 jobs only created in June.

Your opinion how much has the jobs report affected negotiations?

MCCONNELL: Well, it incentivizes us do a big package without raising taxes. But unfortunately, I think the president is not thinking the same thing he did six months ago when the economy didn't seem to me as bad as it is today and he was making arguments that raising taxes in the middle of this recession or slowdown, whatever you want to call it, was a bad idea.

BAIER: Before the development Saturday, Democrats were very upset that the White House was talking about Social Security and Medicare and Medicaid, the entitlements, putting on the table.

Here's House Minority Leader Nancy Pelosi.

(BEGIN VIDEO CLIP)

HOUSE MINORITY LEADER REP. NANCY PELOSI, D-CALIF.: We want to, of course, reduce the deficit as we grow the economy. We are not going to reduce the deficit or subsidize tax cuts for the rich on the backs of America's seniors and working families. No benefit cuts in Medicare and Social Security.

(END VIDEO CLIP)

BAIER: So, the question is: can you to get to even a smaller package, let's say $2.5 trillion without touching Medicare and Social Security? MCCONNELL: Well, look, over 60 percent our budget we don't even vote on. It's popular entitlement programs like Social Security, Medicare, Medicaid and interest payments. You can't do anything serious about our deficit without impacting the biggest percentage of the budget.

And so, I commend the president for putting Medicare and Social Security on the table. He is correct in doing that. You can't have serious deficit reduction program without dealing with those programs in the long term, in the out years.

BAIER: What do you say to the Democratic critics who say, you Republicans are not coming to the table with a lot of give?

MCCONNELL: We have 9.2 percent unemployment. Their prescription is to raise taxes? I mean, my goodness. Who thinks that -- the president didn't think that was a good idea in December. Why do they think it's a good idea now?

BAIER: Well, Senator, the words they are using "shared sacrifice," "balanced approach."

MCCONNELL: Those are nice words. But how do you get the economy growing, which is the biggest way to increase government revenue? You do get the economy growing by having a big tax increase. You get the economy growing by incentivizing the private sector.

Look, if you are in the private sector right now and you're trying to decide whether to expand, what do you see the government doing? Proposing to raise taxes, borrowing, spending, over- regulating. It's not a very reassuring message if you're running a business, if you look at the federal government.

BAIER: Treasury Secretary Tim Geithner is saying this morning that the White House is still going to try to get the biggest deal possible. What is the biggest deal possible?

MCCONNELL: Well, I don't know, but I'm for the biggest deal possible, too, it's just that we're not going to raise taxes in the middle of this horrible economic situation.

BAIER: Would you agree to raise the debt ceiling with promises for big structural changes to the tax code down the road? In other words, is there a mechanism that could tie a current deal to some future promise of a deal?

MCCONNELL: Well, we can't negotiate it here. But let me just say this -- we believe that tax reform is long overdue. And the president believes that as well -- try to get the rates down, take a lot of the preferences out. It's very, very difficult to do that a week. It's an extremely complicated process.

But we are in favor of that, and we think we ought to get about it, but I don't see how you can do in the context of our immediate challenge here, which is to figure what to do in response to the president's request of us to raise the debt ceiling. BAIER: Well, the House Republicans put forward their own debt limit proposal, do you believe?

MCCONNELL: Well, I think we're going to continue to hope here that we can work out something with the administration. Obviously, the other side, the other political side controls most of the government. They have the Senate. They have the presidency. You can't get an accomplishment without some bipartisan agreement. And that's part of what the meeting tonight is about and we hope it will be successful.

BAIER: So, what if there isn't a deal?

MCCONNELL: Well, we're going to go forward and I'll have more to say about that later in the week.

BAIER: Is there a contingency plan?

MCCONNELL: There's always a contingency plan.

BAIER: What does it look like?

MCCONNELL: I'll let you know.

BAIER: I mean, for people out there -- I mean, do you believe it's in serious jeopardy if the debt ceiling is not raise August 2nd.

MCCONNELL: Nobody is talk about not raising the debt ceiling. I haven't heard that discuss by anybody.

BAIER: Some are.

MCCONNELL: Not in the Congress. Yes, nobody is talking about doing that. We're talking about trying --

BAIER: Congresswoman Michele Bachmann has said don't them fool you that the economy is going to collapse.

MCCONNELL: We're talking about using this request that the president made of us to raise the debt ceiling as an opportunity to do something really significant for the country about spending and about debt. And that, of course, would also be good for the economy.

BAIER: So, you believe the August 2nd deadline if the debt ceiling is not raised by then, there would be serious economic repercussions?

MCCONNELL: Well, the secretary of treasury stated we need to do this and we're using this as an opportunity to have a discussion about doing something about spending and debt.

BAIER: There are now even proposals up on Capitol Hill for, again, a clean debt limit crease. Is that a possibility?

MCCONNELL: Look, we're going to try to use this opportunity to do something significant about deficit and debt, to get our spending down, get us headed in the right direction. And I don't think we would have been able to focus on this, but for the president's request of us to raise the debt ceiling.

BAIER: As far as revenue creases, not tax rate increases, revenue increases, closing tax loopholes -- Senator Kyl and House Minority Leader Eric Cantor came to some conclusions in the Vice President Biden meeting, the meetings led by the vice president. They said $150 billion to $200 billion in tax revenue increases. Would you be in favor of that if, let's say, a payroll tax cut is included in there?

MCCONNELL: Well, you are asking me a lot of things that are the subject of negotiations. What we're in favor of is growing the economy. And if you can get the private sector moving, Bret, you can get the private sector, the government will benefit by that by greater revenue.

MCCONNELL: I mean, the principal revenue is down now is not because we have rates that are too low, it's because we're in a very sour economy. When the economy goes south, government goes south as well.We don't want to do anything that keeps us from getting out of this economic trough, and that will, of course, produce more revenue for the government.

BAIER: There are a number of Republicans who are worried that you're going to, quote, "cave" too early. Presidential candidate, Texas Congressman Ron Paul is worried about a deal that promises things down the road.

He said this, "The Democrats pulled a similar maneuver during Ronald Reagan's presidency. A deal that promised 2-to-1 spending cuts in exchange for tax increases. Taxes went up, but the cuts never came. In Washington, if you hear about a so-called deal, you can be sure the taxes will come, but the cuts never will. Agreeing to this scheme by the White House would be a betrayal of the voters who put Republicans back in charge of the House in 2010."

So, would it be a betrayal?

MCCONNELL: I agree with that, by the way. I think he is absolutely right. The one long term spending reduction you can count on is when you make entitlement changes, Bret, that we don't vote on every year. They hold up. When Reagan and Tip O'Neill fixed Social Security which lasted for a generation back in 1983, it lasted for a generation. We didn't go back and revisit it every year because we don't vote on entitlements every year. They're on automatic pilot.

So, I agree with Congressman Paul. I think he's right about that. But I do think long-term entitlement changes do hold up and ought to be a part of any deal that we make.

BAIER: S, without this wall of the debt ceiling, does the prospect of that start to diminish? If you don't have this back stop that pushing up against.

MCCONNELL: Well, it's helpful. I mean, the president's request of us to raise the debt ceiling is the reason we are having these discussions. So, it's been helpful in that sense and I hope it ends up being productive in the end.

BAIER: Senator, I'm sure you're aware of the politics of all of this. Democratic operatives are trying to sell a couple of storylines. One, that if it does not get raised and the economy falters, it's your fault, Republicans walking away from the table. And, two, that Republicans want a sour economy, bad economic numbers.

I received an e-mail with a list of quotes on it -- Republican candidates and leaders saying that bad economic numbers help Republicans' chances in 2012. And on that e-mail is one of your quotes from last year where you said, quote, "The single most important thing we want achieve is for President Obama to be one-term president."

So, how you respond to those Democratic lines of attack?

MCCONNELL: Well, that is true. That's my single most important political goal, along with every act of Republican in the country. But that's in 2012.

Our biggest goal for this year is to get this country straightened out and you can't get this country straightened out if we don't something about spending, about deficit, about the debt, and get this economy moving again. So, our goal is to have a robust, vibrant economy that will benefit all Americans. And that's why I think this debate that we're having right now is so important to our country's future.

BAIER: The treasury secretary also saying there is credible way to get the Congress more time. They have to act, you to act by August 2nd. Is it possible that you will push forward -- and I know we're getting into negotiations here -- a shorter deal that doesn't even take you past 2012? That perhaps is dollar for dollar and only gets you part of the way, but is dollar spending cuts and -- you know, maybe get you $1 trillion.

MCCONNELL: Good try, but those are all the things that we're talking about. And you and I can't resolve it here this morning. I wish we could.

BAIER: Last question -- and it's another topic. The Obama administration transferred this terror suspect, Somali suspect Ahmed Warsame, to the U.S. to try in a federal court, after interrogating him on a U.S. naval ship. You have spoken out against this. The administration continues to argue that there are solid charges that can be brought in federal civil court and the attorney general appears convinced this is still the way forward.

What's the next move in this standoff?

MCCONNELL: I agree with Chuck Schumer. Schumer agreed -- opposed trying KSM in New York, in a regular civilian court. I'm sure he must surely oppose bringing this terrorist to New York. By the way, they are going the try a couple foreign terrorists in Kentucky, in my state, whose fingerprints were found on IEDs in Iraq. These foreign terrorists or enemy combatants, they should be taken to Guantanamo. They should be tried in military commissions, new legislation that we passed just three years go precisely with the purpose of dealing with foreign terrorists. These are not American citizens.

We just found with the Caylee Anthony case, how difficult is to get a conviction in a U.S. court.

I don't think a foreigner is entitled to all the protections of the Bill of Rights. They should not be in U.S. courts. They should be at Guantanamo and before military commissions.

BAIER: Senator McConnell, thank you very much for your time. We'll be interested to hear what happens tonight.

MCCONNELL: I will, too.

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